Suppose you want to invest in a portfolio comprising an index fund that reproduces the market...

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Suppose you want to invest in a portfolio comprising an indexfund that reproduces the market portfolio (such as the S&P/TSXcomposite index) and also T-bills. Your investment budget is$10,000. The market index has an expected return of 16% andstandard deviation of 12%, and the return on T-bills is 4%. Yourgoal is to get an expected return of 14% on the combined portfolio(Index fund and T-bills).
How much do you need to invest in the index fund and how muchin T-Bills?
What is the standard deviation of this combined portfolio?
What is the reward to variability ratio of the index fund?
What is the reward to variability ratio of the combinedportfolio (index fund and T-bills)?

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Return of Portfolio Weight of Index fundReturn of Index fundWeight of T billReturn of T bill 14 16Weight of Index fund41weight of Index fund Weight of Index fund See Answer

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Suppose you want to invest in a portfolio comprising an indexfund that reproduces the market portfolio (such as the S&P/TSXcomposite index) and also T-bills. Your investment budget is$10,000. The market index has an expected return of 16% andstandard deviation of 12%, and the return on T-bills is 4%. Yourgoal is to get an expected return of 14% on the combined portfolio(Index fund and T-bills).How much do you need to invest in the index fund and how muchin T-Bills?What is the standard deviation of this combined portfolio?What is the reward to variability ratio of the index fund?What is the reward to variability ratio of the combinedportfolio (index fund and T-bills)?